Under a block tariff scheme, users step-wisely pay different charges for different consumption levels. With an increasing block tariff, the rate per unit of water increases as the total volume of consumption/ discharge increases. Higher rates are set for higher levels of use. Consumers face a low per unit charge up to a specified quantity (or block) and then for any water consumed/ discharged in addition to this amount, they pay a higher price up to the limit of the second block, and so on. An example for an increasing block tariff is given in the textbox below. The main aim of increasing block tariffs is to set an incentive to use less water. Sometimes these tariffs are also called lifeline tariffs or social block tariffs when they aim to address the needs of the poor by providing a basic level of consumption/ sanitation (for example, using the WHO guidelines of 20 litres per day for basic needs) either for free or at very low cost. The marginal costs of providing the service have then to be covered by confronting customers in the highest price block with the marginal cost prices. In many cities, however, the increasing block tariff fails to reach its objective to address the needs of the poor, because the poor often have large families or more than one family shares a connection. This results in high volumetric uses/ discharges at one connection and consequently higher prices.

Block tariffs can also be designed as decreasing block tariffs. With these tariffs, on the other hand, consumers face a high volumetric charge up to the specified quantity of the first block, and then for any water consumed/ discharged in addition, they pay less. The idea is to reflect the fact that large consumers often impose lower average costs on the system. However, these tariffs are ever less applied because there is a growing interest in promoting water conservation.